Monday, July 1, 2013

Gold/Commodities: Welcome Back, Rationality

(Drivebycuriosity) - Last quarter the gold price tanked around 23%. The yellow metal lost more than 35% from its peak in September 2011. It seems the gold bubble is finally popping. Welcome back, rationality.

Gold is not an investment. Hoarding money in gold is unproductive. The yellow metal doesn´t generate dividends & interest like stocks, bonds and real estate. The gold rally of the recent years was just a kind of mass hysteria. Some were betting on doom & gloom and another recession or a new depression. Other wagered on a hyper inflation. Those bets didn´t make sense because depression and hyper inflation are contradictory.

The falling gold prices since September 2011 signal that the hysteria is abating and the markets are coming back to sanguinity and rationality. There is neither a risk for a depression nor a hyper inflation thanks to the stabilizing monetary policy of the U.S. Federal Reserve Bank.

The popping gold bubble is good for the economy and the stock market. The billions of dollars that had been idled in the yellow metal is now free. This money could pour into the economy and into stocks leading to more economic growth and a further rise of the stock market. 

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